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NEW DELHI : Crude oil prices gave up initial gains on Thursday as demand concerns returned as authorities in Shanghai, China started imposing new Covid-related restrictions fueling concerns of fall of demand.

A two-month long lockdown in Shanghai had ended last week supported oil prices in the past few sessions.

At 7.07 pm, the August contract of Brent futures on the Intercontinental Exchange was at $123.02, lower by 0.45% from its previous close. Oil futures had however started the session in the green and the August contract of Brent touched a high of $124.34 per barrel.

The July contract of West Texas Intermediate on NYMEX fell 0.83% to $121.10 a barrel.

“NYMEX crude oil gave up early gains while base metals slipped as announcement of fresh lockdown measures in China reignited concerns of renewed restrictions and fears of a weaker economic recovery," said a Kotak Securities report.

Analysts expect market sentiments to weaken further as the European Central Bank (ECB) ended a long-running stimulus scheme on Thursday. ECB also indicated that it will announce its first interest rate hike since 2011 next month, followed by a potentially larger move in September if inflation does not cool down. Recent hike in interest rates globally have raised concerns of a growth slowdown, thereby denting demand hopes.

Further, according to Platts Analytics the decision of OPEC and its allies to increase production would dispel Asia’s crude supply concerns amid reviving demand. “Asia is breathing a sigh of relief amid growing expectations that the move by the OPEC-led alliance to boost supplies as well as sustained releases from the US strategic reserves will finally help to clear the uncertainty over cargo availability and rectify the mismatch between global demand and supply," it said.

“The decision by OPEC+ to raise quotas by 648,000 b/d for July and another 648,000 b/d for August -- about 50% higher than the recent monthly increases -- will be music to the ears of global refiners as they head into the summer driving season in the northern hemisphere," said Platts Analytics in a report.

Lim Jit Yang, advisor for Asia-Pacific oil markets at Platts Analytics said that specifically for Asia, refiners will be looking to import more crude as demand is expected to rise by 2 million barrel per day in the third quarter compared with the second quarter. 

“US SPR releases are also helping to ease the oil supply and demand balances, adding about 0.8 million-1 million b/d of supply in recent weeks," he added.

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